Crude oil prices extended losses in the previous session, reporting a third straight weekly loss as investors weighed the reassurances by the Organisation of Petroleum Exporting Countries and its allies (OPEC+) against the latest US jobs data which lowered expectations that the US Federal Reserve will cut interest rates soon.
Brent crude futures settled 25 cents lower at $79.62 a barrel, while US West Texas Intermediate crude (WTI) dropped two cents to $75.53. Crude fell for a third straight week on demand concerns, with Brent down 2.5 per cent and WTI off 1.9 per cent. Coming to domestic prices, crude oil futures last settled 0.08 per cent lower at ₹6,321 per barrel on the multi-commodity exchange (MCX).
What’s hurting crude oil prices?
-Data showed US jobs growth accelerated far more than expected in May, keeping the Fed on track to hold off starting to cut interest rates until September at the earliest. The jobs report indicated higher rates for longer, which tends to dampen enthusiasm on the oil market. The dollar rallied 0.8 per cent to a more than one-week high shortly after the release of the jobs report.
-The European Central Bank (ECB) went ahead with its first interest rate cut since 2019 on Thursday, despite an increasingly uncertain inflation outlook. High borrowing costs can slow economic activity and dampen demand for oil.
-However, oil prices have been buttressed by support from OPEC+ members Saudi Arabia and Russia, indicating readiness to pause or reverse oil output increases. Oil slipped earlier this week after analysts saw Sunday’s OPEC+ meeting as an indication of rising supply, which is bearish for prices.
-The US active oil rig count, an early indicator of future output, fell by four this week to 492, the lowest since January 2022, said energy services firm Baker Hughes. Meanwhile, in China, data showed that although exports grew for a second month in May, crude oil imports dropped, signalling demand concerns in the world’s largest crude oil buyer.
-In Russia, the operations of the Novoshakhtinsk oil refinery in southern Rostov region suffered significant disruptions after a fire following a drone attack on Thursday. Money managers cut their net long U.S. crude futures and options positions in the week to June 4, said the US Commodity Futures Trading Commission (CFTC).
Where are prices headed?
Analysts noted that crude oil exhibited significant price volatility and extended its gains after the ECB cut interest rates by 25 basis points for the first time since 2019. Both the Bank of Canada and the ECB lowered interest rates in their policy meetings amid easing inflation and as a measure to boost demand.
‘’OPEC+ also clarified on Thursday its policy decision to restore production from October onwards, further supporting crude oil prices. We expect crude oil prices to remain volatile. Crude oil has support at $74.70–74.10 and resistance at $75.90–76.50. In INR, crude oil has support at ₹6,250–6,190 and resistance at ₹6,390–6,460,” said Rahul Kalantri, VP Commodities, Mehta Equities Ltd.
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Published: 08 Jun 2024, 10:02 PM IST
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